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Restaurant stocks on the move: Darden Restaurants, Inc. (NYSE: DRI), Cracker Barrel (CBRL) and West Coast Ventures Group Corp. (OTC:WCVC)

The rise of new trends, like CBD infused food and an increased focus on eco-friendly food, is set to make 2019 an exciting year for restaurant investing



The restaurant sector is one of the toughest out there. As tastes become more refined and the field becomes more crowded, it takes a particularly successful operator to navigate these tricky waters. Some companies have shown a particular flare for the food business and a look at stocks like Darden Restaurants, Inc. (NYSE: DRI), Cracker Barrel (CBRL) and West Coast Ventures Group Corp. (OTC:WCVC) helps to provide an insight into what works, and what doesn’t.

Efficiency building profits

Darden Restaurants, Inc. (NYSE: DRI) owns and operates full-service restaurants across the U.S., featuring recognizable brands like Olive Garden and the LongHorn Steakhouse. With over 180,000 team members working across 1,700 restaurants, DRI stands out as a particularly successful operator.

The venture is growing dynamically and Darden has opened 39 new restaurants during Q3 2019. Along with adding more locations to its portfolio, DRI has amended their policies and streamlined the procedures and solutions used in existing restaurants.

The daring new strategy is focused on integrating energy and water saving measures into designs of new buildings, as well as retrofitting the existing restaurants with more efficient features. This has enabled Darden to cut up to 17% of energy expenses and 22.5% of water use per restaurant.

Darden’s eco-intiatives have set them apart from the competition. (Source)

The company is also taking steps to give back to the communities they operate in. The Darden Harvest program donated 10 million pounds of food of food in 2018, surpassing their previous efforts. Since the programme started in 2003 Darden has provided roughly 100 million meals.

To strengthen the impact of their pro-eco initiatives, Darden Restaurants have recently announced an animal welfare policy to articulate their position and values concerning the treatment of animals in their supply chain. Among other concerns, Darden aims to improve the mobility of the animals while at the same time reducing stress and fear they have to face.

DRI is definitely adjusting well to the expectations of contemporary consumers, which is reflected in their financial performance. Their stock noted earnings per share growth rate of roughly 20.2%. While the industry is expected to grow in 2019 at an average of 3.2%, Darden is expected to grow 5.4%. With a favorable growth perspectives, Darden Restaurants seems to be moving in the right direction.

Southern breakfast

Although mostly present in the southern states, Cracker Barrel Old Country Store, Inc. (CBRL) is has a footprint all around the U.S. With a market capitalization of $3.9 billion it is in the top of its league.

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The company prefers to stand by a stable business model, focused on recurring visits from highway travelers. That strategy is reflected in the number of new restaurants being opened, as in 2018 Cracker Barrel has expanded to just 10 new locations and plan to open 8 new restaurants by the end of 2019.

Constantly focusing on improving its menu, Cracker Barrel completed the rollout of its craft coffee last year and it plans to introduce a catering menu that would enhance their off-premise sales.

In parallel to improving sales, Cracker Barrel is also enacting cost saving measures, such as more effective food waste and labor management. So far these efforts have provided CBRL with $6.3 million in annual cost savings – a number expected to grow up to $10 million by the end of 2019.

Cracker Barrel has come under criticism from it’s main shareholder – Biglari Capital, who control 14.7% of their stock. Biglari favors selling or shutting down the recently inaugurated brand of Holler & Dash restaurants which they believe distracts from  the main goals of Cracker Barrel. Despite their concerns the CBRL team has created healthy EPS growth before, during, and after the launch of Holler & Dash, undermining Biglari’s argument.

Even though the company’s stock declined 7.7% year over year because of high expenses, their shares have gained 24% annually on a total return basis over the last five years. Revenues went up 4.6% compared to last year, and in Q1 of 2019 increased 3% from the prior-year quarter, marking out Cracker Barrel as a company on the rise.

Moving into the green

The fast-casual restaurant sector accounts for roughly $780 billion in annual sales. West Coast Ventures Group Corp. (OTC:WCVC) is already capitalizing on that fact by introducing two new brands onto the U.S. dining map: Illegal Burger, a quick-casual burger and bar concept and El Señor Sol – a full-service fresh Mexican restaurant. So far, WCVC has opened 6 restaurants in Denver, Colorado area.

WCVC CEO Jim Nixon plans to make his Illegal Burger unique by opening it onto the freshly inaugurated CBD market and reaping benefits of what could be a part of the $146.4 million industry. The secret formula hasn’t been unveiled yet, but more news is on the way and the company plans a public announcement on the 20th of April – “the day” among the cannabis community.

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Illegal Burger’s strategy is to spread quickly and sustainably. This is thanks to the Rapid Restaurant Buildout Model, new locations can be set up within short span of time. This shortens the time from the initial investment to profitability and gives Illegal Burger an edge over its competition.

An agreement signed last year with North American Cannabis Holdings Inc. (USMJ) makes WCVC responsible for managing the rollout of AmeriCanna Cafe in Denver, originally founded by USMJ and spun-off as a independently listed public company. The cooperation will start by a pilot program featuring an AmeriCanna Cafe food truck at places neighboring recreational marijuana dispensaries in Colorado.

CBD infused drinks represent an exciting alternative to alcohol at restaurants. (Source)

Another beneficial partnership has been struck with Puration Inc. (PURA) – producer of the EVERx CBD Sports Waters. The CBD-infused drink has grow 600% in sales after the first year since its inception in 2017 and now is contributing to growth of WCVC.

Even if there is a stark difference in the size of WCVC and preceding companies, their concept has the potential to be game changing. The cannabis sector is gaining momentum, but it’s still rare to see a restaurant chain being aware of this positive trend – something that might become WCVC’s edge in the upcoming years.

The high saturation in the restaurants and fast-food market does not stop newcomers from trying their fortunes in this sector. As the aforementioned companies prove, by implementing innovations into their menus and procedures, a new relation can be established with the modern client. And that in return propels sales to levels above expectations.

DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.

This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.

Writing to expose the fascinating world of modern breakthroughs while feeding his endless curiosity. While separated from a keyboard, he likes to rock out with a guitar or grab a toolbox to bring his DIY imaginations into life.

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